Such power stations already exist in developed nations, but in India there is no policy in place yet for such plants.
The government has so far been focusing on adding capacity only through the base load power plants. As much as 43,000 mw of power capacity has been awarded through competitive bidding for setting up base load power plants in the country.
CERC has proposed putting in place separate policy guidelines for holding competitive bidding for peaking power plants as well.
The authority has cited the example of Pune city, where customers have agreed to pay more during peak hours to avoid power cuts.
The per-unit cost from a peaking power plant is double that of the cost of power from a base load power plant. "In India it will be in the range of `5-6 per unit depending on the fuel of the power plant," said Deo.
Experts welcome the CERC proposal.
"It is a great move," said Kuljeet Singh, partner, infrastructure practice, Ernst & Young.
"But the government will have to ensure that before having peaking power station in the country, it introduces penalty clause for the state electricity boards for resorting to load shedding during peak hours, as they may not like to buy power from these stations due to higher cost per unit," he said.
"Also, the government should introduce differential tariffs for peak hours so that customers are made to pay more for costly power that is supplied to them during that time of the day."
The country faced peak time power shortage of 10.3% during the last financial year.
For the current fiscal, the Central Electricity Agency has projected a peaking power deficit of 6.5%.
The total power generation capacity in the country today stands at 1,69,748 mw. The Ministry of Power has said it would be able to add around 17,196 mw this fiscal.
The government has set a target of adding 1,00,000 mw capacity during the 12th Plan period, of which around 50% will come from the private sector.